Analyst Krutikhin predicted the sad fate of the “secret” Beijing contract of Gazprom

Economic analyst Mikhail Krutikhin assessed the prospects for the implementation of agreements on the supply of gas and oil to China, prepared by Gazprom and Rosneft. In a commentary for Gas & Money, he pointed out that these are documents that imply the annual supply of 10 billion cubic meters of gas to China via the new “Far East” route and 10 million tons of oil through Kazakhstan.

“In the case of Rosneft, everything is simple and transparent,” he said, recalling the company’s contract with CNPC, signed in 2013, under which the Chinese have been receiving 10 million tons of oil annually through Kazakhstan since 2017 for their refineries located in Xinjiang. – Uighur Autonomous Region. — In Beijing, this time the signing of an amendment to the contract, which expired in 2023, took place. Now the usual regular supplies of the same volume of oil will continue for another ten years. There is nothing sensational or urgent in this amendment. Moreover, it secures for a new period the annual volume of oil supplied via the Kazakh route.”

But with the Gazprom contract, the expert pointed out, “far from everything is clear.”

Krutikhin explained that the “Far East” route, through which gas should go to China, is the Sakhalin-Khabarovsk-Vladivostok highway, which has already been built, with a design capacity of 33-35 billion cubic meters per year.

“But to achieve such a capacity, Gazprom needs to build an additional 12 compressor stations, since now the route is hardly able to pump 1.5 billion cubic meters to Vladivostok. In addition, to enter the territory of the PRC, one or two pipeline crossings across the border will have to be laid from this highway to Primorye. In technical terms, it is not difficult to turn the track into an export one. It remains to be seen where the 10 billion cubic meters of gas promised under the new contract per year will come from, ”Krutikhin explained, noting that the Russian company does not have such volumes on Sakhalin.

“It turns out that the Chinese were promised gas from the Sakhalin-3 project, where Gazprom is working without partners,” the analyst argues.

He added that the main source there is the offshore Yuzhno-Kirinskoye field. However, this object was under American restrictions.

“The only option for establishing gas production there is underwater complexes (the conditions do not allow working from platforms or from the shore), and the few companies that are able to manufacture and assemble the necessary complexes on the seabed are either American or do not want to violate the sanctions regime. The development of the field has been postponed indefinitely, which calls into question the new contract between Gazprom and the Chinese,” Krutikhin said.

True, he believes, it is possible to connect the “Power of Siberia”.

“When Gazprom was planning the Power of Siberia, the following scheme was also considered among the options for organizing the infrastructure: gas from Yakutia and the Irkutsk region will go to China through the border near Blagoveshchensk, but part of it will go through a pipe to Khabarovsk, where this flow will merge with gas from Sakhalin,” the analyst noted. — The volume of deliveries along the branch from Yakutia was calculated at the level of 9-10 billion cubic meters per year. Without Sakhalin gas and without an LNG plant, this volume could have reached the Chinese border along the Khabarovsk-Vladivostok highway.”

Krutikhin added that the terms of Gazprom’s Beijing contract were not disclosed.

“So far, one thing is clear: if it is supposed to receive gas from Sakhalin, then it will take a long time to wait for such an opportunity, and sanctions against the participation of foreign technology companies in such projects can be expanded. As for the exit of Power of Siberia-2 (the main line that will connect the traditional gas production areas in the Yamalo-Nenets Autonomous Okrug with China through Mongolia) to Khabarovsk, the main obstacle here remains the colossal cost of the necessary infrastructure, which is unlikely to pay off in the foreseeable future – especially when you consider the low price the Chinese are paying for Power of Siberia’s Russian gas. Although, of course, did the lack of payback prospects stop Gazprom from politicized megaprojects?” the expert concluded.

The other day, we recall, Russian President Vladimir Putin, during negotiations with Chinese President Xi Jinping, announced that Russian companies had prepared “very good new solutions” for the supply of hydrocarbons to China.

It was also reported that Gazprom and China National Petroleum Corporation (CNPC) signed a long-term contract for the supply of blue fuel via the Far East route. “After the project reaches its full capacity, the volume of Russian pipeline gas supplies to China will increase by ten billion cubic meters and in total will reach 48 billion a year (including supplies via the Power of Siberia gas pipeline),” Gazprom said in a statement.